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Monday, September 21, 2015

Drinkers Don’t Drain Taxpayers

Drinkers subsidize the state, not the other way around


Public health advocates love to make the case that “sinners” — those folks who drink, smoke, or eat “unhealthy” foods — cost society money, and that gives bureaucrats the right to interfere in their lives.

Users and abusers of these products cost taxpayers billions of dollars, they say. If we have to pay for it, that’s argument enough to justify tax increases, advertising restrictions, and sometimes outright product bans.

But is it true?

A new study by Christopher Snowdon, director of lifestyle economics at the Institute of Economic Affairsfound that while drinkers in England cost around £3.9 billion per year, they provide £10.4 billion in annual tax revenue.

Therefore, drinkers in England are actually subsidizing non-drinkers to the tune of £6.5 billion per year!

As with Snowdon’s previous study, The Wages of Sin Taxesa good portion of the paper is dedicated to parsing out the difference between private costs and public costs.

While health advocates will claim that research shows alcohol use costs England up to £20 billion a year, such statistics include items like lost productivity due to absenteeism, emotional distress, and the money spent on the product itself — none of which are costs borne by taxpayers.

Furthermore, most studies do not look at tax revenue as an offsetting benefit when determining the cost of alcohol on society.

However, as the World Health Organization advises, “taxation is a transfer of money from one group to another and therefore does not constitute a social benefit. However, if we are looking at external costs (or the costs to a particular actor such as government) then taxation does become an external benefit.”

So, looking only at the amount alcohol-related problems cost for government agencies dealing with health, crime, and welfare, the figure is actually much smaller than health campaigners would like people to believe.

This doesn’t even take into account the possible alcohol-related health benefits that regular, moderate alcohol consumption that would reduce costs for government (such as lower rates of heart disease).

It’s time to stop maligning and targeting the lifestyle choices of individuals on the grounds that they are forcing costs onto society. Or, as Snowdon more eloquently put it:

It is time to stop pretending that drinkers are a burden on taxpayers. Drinkers are taxpayers and they pay billions of pounds more than they cost the NHS, police service and welfare system combined.
The economic evidence is very clear on this. Forty per cent of the EU’s entire alcohol tax bill is paid by drinkers in Britain and, as this new research shows, teetotallers in England are being subsidised by drinkers to the tune of at least six and a half billion pounds a year.
This post first appeared at CEI.org.

  • Michelle Minton is the Competitive Enterprise Institute's fellow specializing in consumer policy, including the regulation of alcohol, food, and gambling.